UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM 10Q
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(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the quarterly period ended October 31, 2008
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from __________ to ___________
Commission file number: 000-27211
MEDINA INTERNATIONAL HOLDINGS, INC.
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(Exact name of registrant as specified in its charter)
COLORADO 84-1469319
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(State of Incorporation) (IRS Employer ID Number)
No. 255 S. Leland Norton Way, San Bernardino, CA, 92408
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(Address of principal executive offices)
909-522-4414
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(Registrant's Telephone number)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the past 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to the filing requirements for
the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant is a large accelerated file, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [ ] (Do
not check if a smaller reporting company) Smaller reporting company [X]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No [ X]
Indicate the number of share outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
As of December 2, 2008, there were 35,660,091 shares of the registrant's common
stock issued and outstanding.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited) Page
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Consolidated Balance Sheets - October 31, 2008 and April 30, 2008 F-1
Consolidated Statements of Operations -
Three months and six months ended October 31, 2008 and 2007 and
From March 16, 1998 (Inception) to October 31, 2008 F-2
Consolidated Statements of Cash Flows -
Six months ended October 31, 2008 and 2007 and
From March 16, 1998 (Inception) to October 31, 2008 F-3
Consolidated Statement of Changes in Stockholders' Equity (Deficit) -
From March 16, 1998 (Inception) to October 31, 2008 F-4
Notes to Consolidated Financial Statements F-5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 1
Item 3. Quantitative and Qualitative Disclosures About Market Risk - Not Applicable 5
Item 4. Controls and Procedures 5
Item 4T. Controls and Procedures 5
PART II - OTHER INFORMATION
Item 1. Legal Proceedings -Not Applicable 7
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 7
-Not Applicable
Item 3. Defaults Upon Senior Securities - Not Applicable 7
Item 4. Submission of Matters to a Vote of Security Holders - Not Applicable 7
Item 5. Other Information - Not Applicable 7
Item 6. Exhibits 7
SIGNATURES 8
PART I. - FINANCIAL INFORMATION
MEDINA INTERNATIONAL HOLDINGS, INC.
AND SUBSIDIARY
(A Development Stage Company)
Consolidated Balance Sheets
October 31, April 30,
2008 2008
----------------------------------
(Unaudited) (Audited)
Assets
Current Assets:
Cash $ 15 $ -
Inventory 71,702 68,813
Prepaid expenses 24,000 24,000
----------------------------------
Total current assets 95,717 92,813
Fixed Assets:
Watercraft molds 343,131 342,993
Office equipment 20,740 20,740
Manufacturing tools 12,249 12,249
----------------------------------
376,120 375,982
Accumulated depreciation (85,828) (57,256)
----------------------------------
Total fixed assets 290,292 318,726
Other Assets:
Investment 25,500 25,500
Total other assets 25,500 25,500
----------------------------------
----------------------------------
TOTAL ASSETS $ 411,509 $ 437,039
==================================
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Bank Overdraft $ - $ 20
Accounts payable and accrued interest 164,366 191,158
Accrued Interest 1,227 40,950
Lines of Credit 7,780 17,156
Customer Deposit 61,700 24,500
Notes payable 97,325 10,000
Related Parties - short-term borrowings from shareholders 368,805 362,447
----------------------------------
Total current liabilities 701,203 646,231
Stockholders' equity (deficit):
Preferred stock, $.00001 par value, 10,000,000 shares
authorized, none issued and outstanding - -
Common stock, $0.00001 par value, 100,000,000 shares
authorized, 35,660,091 shares issued and outstanding
on October 31, 2008 and April 30, 2007, respectively 3,566 3,566
Additional paid-in capital 2,429,022 2,429,022
Shares committed to be issued 242,113 241,563
Subscription receivable (3,000) (3,000)
Accumulated deficit during the development stage (2,961,395) (2,880,343)
----------------------------------
Total stockholders' deficit (289,694) (209,192)
----------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT $ 411,509 $ 437,039
==================================
See notes to these consoldiated financial statements.
F-1
MEDINA INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARY
(A Development Stage Company)
Consolidated Statements of Operations
(Unaudited)
Three Months Ended Six Months Ended March 16, 1998
October 31, October 31, (Inception) to
2008 2007 2008 2007 October 31, 2008
--------------------------------- -------------------------------- -----------------------
Revenues $ - $ - $ - $ 192,800 $ 217,800
Cost of Goods Sold - - - 86,994 86,264
--------------------------------- -------------------------------- -----------------------
Gross Profit - - - 105,806 131,536
Operating expenses:
Marketing & sales - 8,001 - 8,245 8,425
Professional Fees 9,517 6,984 11,228 19,891 188,416
Bank Charges 135 751 625 3,962 7,075
Telephone 1,539 1,533 2,116 3,294 16,418
Travel - 2,027 - 11,077 42,537
Settlement of Debt - - - - 17,000
Stock Companesation 500 - 550 247,429 1,944,654
Research & development - - - 25,000
Consultant Expenses - 30,000 - 421,600 497,500
Commission Expenses - - - - 26,510
Rent 9,000 9,000 18,000 18,000 75,000
Other Administrative Expenses 15,304 32,444 30,982 99,044 194,973
------------------------------------------------------------------- -----------------------
Loss from operations (35,995) (90,740) (63,501) (726,736) (2,911,972)
------------------------------------------------------------------- -----------------------
Other income (expense):
Other income - - 90 - 26,670
Other Expenses - - - - (3,901)
Interest expense (8,386) (7,489) (17,641) (15,258) (72,191)
--------------------------------- -------------------------------- -----------------------
Total Other income (expense): (8,386) (7,489) (17,551) (15,258) (49,422)
--------------------------------- -------------------------------- -----------------------
Net loss $ (44,381) $ (98,229) $ (81,052) $ (741,994) $ (2,961,394)
================================= ================================ =======================
Weighted average number of
common shares outstanding 35,660,091 31,988,541 35,660,091 31,533,190
================================= ================================
Net loss per share $ (0.001) $ (0.003) $ (0.002) $ (0.024)
================================= ================================
See notes to these consolidated financial statements.
F-2
MEDINA INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(Unaudited)
Deficit Accum.
Additional Shares During the
Common Stock Paid-In Committed Subscription Development
Shares Amount Capital Be issued Receivable Stage Totals
------------ ------------ ------------ --------------------------------- -----------
Balance - March 16, 1998 - $ - $ - $ - $ - $ - $ -
Stock issued for services 2,400,000 240 1,760 - - - 2,000
Stock issued for cash 300,000 30 24,970 - (10,500) - 14,500
Net loss for year (2,793) (2,793)
------------ ------------ ------------ -------------------- ------------ -----------
Balance - April 30, 1999 2,700,000 270 26,730 - (10,500) (2,793) 13,707
------------ ------------ ------------ -------------------- ------------ -----------
Cash payment of subscription
receivable - - - - 10,250 - 10,250
Net loss for year - - - - - (5,253) (5,253)
------------ ------------ ------------ -------------------- ------------ -----------
Balance - April 30, 2000 2,700,000 270 26,730 - (250) (8,046) 18,704
------------ ------------ ------------ -------------------- ------------ -----------
Net loss for year - - - - - (21,426) (21,426)
------------ ------------ ------------ -------------------- ------------ -----------
Balance - April 30, 2001 2,700,000 270 26,730 - (250) (29,472) (2,722)
------------ ------------ ------------ -------------------- ------------ -----------
Net income for year - - - - - 4,881 4,881
------------ ------------ ------------ -------------------- ------------ -----------
Balance - April 30, 2002 2,700,000 270 26,730 - (250) (24,591) 2,159
------------ ------------ ------------ -------------------- ------------ -----------
Net loss for year - - - - - (4,610) (4,610)
------------ ------------ ------------ -------------------- ------------ -----------
Balance - April 30, 2003 2,700,000 270 26,730 - (250) (29,201) (2,451)
------------ ------------ ------------ -------------------- ------------ -----------
Net loss for year - - - - - (7,397) (7,397)
------------ ------------ ------------ -------------------- ------------ -----------
Balance - April 30, 2004 2,700,000 270 26,730 - (250) (36,598) (9,848)
------------ ------------ ------------ -------------------- ------------ -----------
Stock issued for services 24,120,000 2,412 - - - - 2,412
Subscription receivable - - (250) - 250 - -
Net loss for year - - - - - (61,682) (61,682)
------------ ------------ ------------ -------------------- ------------ -----------
Balance - April 30, 2005 26,820,000 2,682 26,480 - - (98,280) (69,118)
------------ -------------------------- ---------------------------------------------
Stock issued for services 1,954,109 195 976,860 - - - 977,055
Stock issued for royalties 3,600 1 1,799 - - - 1,800
Stock issued for rent 1,250 - 625 - - - 625
Stock issued for license 33,332 3 16,663 - - - 16,666
Stock issued for
consideration 50,000 5 24,995 - - - 25,000
Stock issued for cash 126,100 13 63,037 - - - 63,050
Net loss for year - - - - - (1,039,512) (1,039,512)
------------ ------------ ------------ -------------------- ------------ -----------
Balance - April 30, 2006 28,988,391 2,899 1,110,459 - - (1,137,792) (24,434)
------------ ------------ ------------ -------------------- ------------ -----------
Stock issued for services 670,000 67 334,933 - - - 335,000
Stock issued for consulting 225,000 22 112,478 - - - 112,500
Stock issued for royalties 3,200 0 1,600 - - - 1,600
Stock issued for rent 450 0 225 - - - 225
Stock issued to Directors 37,500 4 18,746 - - - 18,750
Stock issued for conversion of
loan 100,000 10 18,690 - - - 18,700
Stock issued for cash 100,000 10 49,990 - (4,000) - 46,000
Stock issued for cash 200,000 20 49,980 - - - 50,000
Shares to be committed to
be issued - - - 30,625 - - 30,625
Net loss for year - - - - - (649,321) (649,321)
------------ ------------ ------------ -------------------- ------------ -----------
Balance - April 30, 2007 30,324,541 3,032 1,697,101 30,625 (4,000) (1,787,113) (60,355)
------------ ------------ ------------ -------------------- ------------ -----------
Stock issued for consulting 4,923,000 492 647,158 - - - 647,650
Stock issued for royalties 12,200 2 1,627 - - - 1,629
Stock issued to Directors 75,000 8 13,492 - - - 13,500
Stock issued for cash 124,000 12 14,988 - 1,000 - 16,000
Stock issued to Vendor 150,000 15 29,985 30,000
Shares issued for rent -
mailbox 51,350 5 24,670 24,675
Shares to be committed to
be issued - - - 210,938 - 210,938
Net loss - - - - - (1,093,230) (1,093,230)
------------ ------------ ------------ -------------------- ------------ -----------
Balance - April 30, 2008 35,660,091 3,566 2,429,022 241,563 (3,000) (2,880,343) (209,192)
------------ ------------ ------------ -------------------- ------------ -----------
Stock issued to Directors - - - 550 - - 550
Net loss - - - - - (81,052) (81,052)
------------ ------------ ------------ -------------------- ------------ -----------
Balance - October 31, 2008 35,660,091 $ 3,566 $ 2,429,022 $ 242,113 $ (3,000) $ (2,961,395)$ (289,694)
============ ============ ============ ==================== ============ ===========
See notes to these consolidated financial statements.
F-3
MEDINA INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARY
(A Development Stage Company)
Consolidated Statements of Cash Flows
(Unaudited)
March 16, 1998
Six Months Ended (Inception) to
October 31, October 31,
2008 2007 2008
------------------------------- ----------------------
Cash flows from operating activities:
Net loss $ (81,052) $ (741,994) $ (2,961,395)
Adjustments to reconcile net loss to net cash
used in operating activities:
Common stock issued in exchange for consulting 550 692,529 2,407,701
Vendor settlement - - 6,000
Settlement of debt - 2,000 18,700
Depreciation 28,572 28,623 85,828
Impairment Loss on Investment - - 19,500
Changes in operating assets and liabilities: - - -
Increase in other receivable - - -
Increase in inventory (2,889) (7,280) (71,702)
(Decrease) increase in accounts payable
and accrued interest (16,515) 42,661 159,093
Increase in customer deposits 37,200 - 61,700
------------------------------- ----------------------
Total adjustments 46,918 758,533 2,686,820
------------------------------- ----------------------
Net cash (used) received in operating activities (34,134) 16,539 (274,575)
------------------------------- ----------------------
Cash flows from investing activities:
Increase in Investment - - (25,000)
Purchase of fixed assets (138) (22,476) (376,120)
------------------------------- ----------------------
Net cash used in investing activities (138) (22,476) (401,120)
------------------------------- ----------------------
Cash flows from financing activities:
Bank overdraft (20) 3,645 -
Proceeds from notes payables related party 6,358 2,222 386,508
Proceeds from note payable 37,325 - 60,000
Payments on lines of credit (9,376) (14,066) 27,402
Proceeds from the issuance of common stock - 9,000 201,800
------------------------------- ----------------------
Net cash provided by financing activities 34,287 801 675,710
------------------------------- ----------------------
Net increase (decrease) in cash and cash equivalents 15 (5,136) 15
Cash and cash equivalents - beginning of period - 5,136 -
------------------------------- ----------------------
Cash and cash equivalents - end of period $ 15 $ - $ 15
=============================== ======================
Supplemental disclosure of cash flow information:
Interest Paid $ - $ - $ -
=============================== ======================
Taxes paid $ - $ - $ -
=============================== ======================
Non-cash financing and investing activities:
Increase in office equipment and tools
and related party notes payable $ - $ 32,989 $ 32,989
=============================== ======================
Advance to vendor in exchange for shares issued of 150,000 $ - $ 24,000 $ 24,000
=============================== ======================
Stock issued for compensation $ 550 $ 692,529 $ 2,407,151
=============================== ======================
See notes to these consolidated financial statements.
F-4
MEDINA INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED OCTOBER 31, 2008
(UNAUDITED)
NOTE 1 - BUSINESS, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
Business
Medina International Holdings, Inc. ("Company") was formed in 1998 as Colorado
Community Broadcasting, Inc. and the Company changed the name of the business in
2005 to Medina International Holdings, Inc. The Company intended to purchase low
power television licenses or stations and planned to broadcast local programming
mixed with appropriate national programming.
The Company plans to manufacture and sell Recreational and Commercial boats
through its subsidiary. The Company has designed and built a complete mold for
21' Commercial Fire Rescue boat and recreated complete mold for 15' fire and
rescue boat. The Company has acquired the licenses to manufacture 12', 15', 18',
20', 24', 28', 30', 35', 37' Rescue and Fire Rescue boats. In addition, the
Company has acquired the license to manufacture and sell 22' Vortex and 30'
Modena recreational boats. The Company is in the process of manufacturing the
21' Fire Rescue which was developed internally by the Company.
The Company formed Medina Marine, Inc. as and wholly owned subsidiary of the
company. Medina Marine was incorporated in the State of California on May 22,
2006 to produce Fire Rescue, Rescue and Recreational boats.
On June 18, 2008, the following agreements were entered into :
Fixed Asset Purchase Agreement
On June 18, 2008, we entered into a Fixed Asset Purchase Agreement with MGS
Grand Sports, Inc. ("MGS Grand") and Mardikian Design Associates ("Mardikian")
to purchase the fixed assets of Modena Sports, Design, LLC ("Modena Sports") in
exchange for 5,500,000 shares of the Company's restricted common stock. MGS
Grand owns a 95% equity interest in Modena Sports and Mardikian owns the
remaining 5% equity interest. The fixed assets to be acquired by us consist of
office equipment, tools and machinery. In addition, we will acquire web sites
and domain names for the websites Modena Sports. Upon the completion of the
transaction, Modena Sports will become our wholly-owned subsidiary. The
transaction will be completed upon the delivery of audited financial statements
of Modena Sports Designs, LLC which is expected within 200 days of this
agreement.
Modena Sports was organized in the state of California and does business as
Harbor Guard Business. Modena Sports is involved in the manufacturing of fire
and rescue boats.
F-5
Mold Purchase Agreement
On June 18, 2008, the Company, MGS Grand and Mardikian Design entered into a
Mold Purchase Agreement, as a part of the Fixed Asset Purchase Agreement,
referred to above. The Mold Purchase Agreement allows for the purchase of
certain molds and tools from MGS Grand and Mardikian Design.
Basis of Presentation
Development Stage Company
The Company has not earned significant revenues from planned operations.
Accordingly, the Company's activities have been accounted for as those of a
"Development Stage Company", as set forth in Statement of Financial Accounting
Standards No. 7 ("SFAS"). Among the disclosures required by SFAS No. 7 are that
the Company's financial statements of operations, stockholders' equity and cash
flows disclose activity since the date of the Company's inception.
Presentation of Interim Information
In the opinion of the management of the Company, the accompanying unaudited
financial statements include all normal adjustments considered necessary to
present fairly the financial position and operating results of the Company for
the periods presented. The financial statements and notes are presented as
permitted by Form 10-Q, and do not contain certain information included in the
Company's Annual Report on Form 10-K for the fiscal year ended April 30, 2008.
It is management's opinion that when the interim financial statements are read
in conjunction with the April 30, 2008. Annual Report on Form 10-K, the
disclosures are adequate to make the information presented not misleading.
Interim results are not necessarily indicative of results for a full year or any
future period.
Going Concern
In the Company's Annual Report on Form 10-K for the fiscal year ended April 30,
2008, the Report of the Independent Registered Public Accounting Firm includes
an explanatory paragraph that describes substantial doubt about the Company's
ability to continue as a going concern.
The Company's interim financial statements for the six months ended October 31,
2008 have been prepared on a going concern basis, which contemplates the
realization of assets and the settlement of liabilities and commitments in the
normal course of business. The Company reported a net loss of $81,052 for the
six months ended October 31, 2008, and an accumulated deficit of $2,961,394 as
of October 31, 2008. The Company also has a working capital deficiency of
$605,486 and the Company has not recognized any revenues from its business
operations.
F-6
The future success of the Company is likely dependent on its ability to attain
additional capital to develop its proposed products and ultimately, upon its
ability to attain future profitable operations. There can be no assurance that
the Company will be successful in obtaining such financing, or that it will
attain positive cash flow from operations.
Summary of Accounting Policies:
Use Of Estimates
The preparation of financial statements in conformity with United States
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash And Cash Equivalents
The Company considers all liquid investments with a maturity of three months or
less from the date of purchase that are readily convertible into cash to be cash
equivalents. The Company maintains its cash in bank deposit accounts that may
exceed federally insured limits. The company has not experienced any losses in
such accounts. At October 31, 2008, the Company had $15 in cash or cash
equivalents.
Inventory
Inventories are stated at the lower of cost (first-in, first-out) or market and
consist of finished goods and raw materials.
Property & Equipment
Capital assets are stated at cost. Equipment consisting of laser stripping
equipment is carried at cost. Depreciation of equipment is provided using the
straight-line method over the estimated useful lives (5-7 years) of the assets.
Expenditures for maintenance and repairs are charged to expense as incurred.
Long-Lived Assets
Effective January 1, 2002, the Company adopted Statement of Financial Accounting
Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived
Assets" ("SFAS 144"), which addresses financial accounting and reporting for the
impairment or disposal of long-lived assets and supersedes SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of," and the accounting and reporting provisions of APB Opinion No.
30, "Reporting the Results of Operations for a Disposal of a Segment of a
Business." The Company periodically evaluates the carrying value of long-lived
assets to be held and used in accordance with SFAS 144. SFAS 144 requires
impairment losses to be recorded on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash flows estimated
to be generated by those assets are less than the assets' carrying amounts. In
that event, a loss is recognized based on the amount by which the carrying
amount exceeds the fair market value of the long-lived assets. Loss on
long-lived assets to be disposed of is determined in a similar manner, except
that fair market values are reduced.
F-7
Revenue Recognition
Revenue Recognition is recognized when earned. The Company's revenue recognition
policies are in compliance with Staff accounting bulletin (SAB) 104. Sales
revenue is recognized at the date of shipment to customers when a formal
arrangement exists, the price is fixed or determinable, the delivery is
completed, no other significant obligations of the Company exist and
collectability is reasonably assured. Payments received before all of the
relevant criteria for revenue recognition are satisfied are recorded as unearned
revenue.
Fair Value Of Financial Instruments
Statement of financial accounting standard No. 107, Disclosures about fair value
of financial instruments, requires that the Company disclose estimated fair
values of financial instruments. The carrying amounts reported in the statements
of financial position for current assets and current liabilities qualifying, as
financial instruments are a reasonable estimate of fair value.
Foreign Currency Translation And Hedging
The Company is exposed to foreign currency fluctuations due to international
trade. The management does not intend to enter into forward exchange contracts
or any derivative financial investments for trading purposes. The management
does not currently hedge foreign currency exposure.
Basic And Diluted Net Loss Per Share
Net loss per share is calculated in accordance with the Statement of financial
accounting standards No. 128 (SFAS No. 128), "Earnings per share". SFAS No. 128
superseded Accounting Principles Board Opinion No. 15 (APB 15). Net loss per
share for all periods presented has been restated to reflect the adoption of
SFAS No. 128. Basic net loss per share is based upon the weighted average number
of common shares outstanding. Diluted net loss per share is based on the
assumption that all dilutive convertible shares and stock options were converted
or exercised. Dilution is computed by applying the treasury stock method. Under
this method, options and warrants are assumed to be exercised at the beginning
of the period (or at the time of issuance, if later), and as if funds obtained
thereby were used to purchase common stock at the average market price during
the period.
Recently Issued Accounting Pronouncements:
In December 2007, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 141 (Revised 2007),
Business Combinations, or SFAS No. 141R. SFAS No. 141R will change the
accounting for business combinations. Under SFAS No. 141R, an acquiring entity
will be required to recognize all the assets acquired and liabilities assumed in
a transaction at the acquisition-date fair value with limited exceptions. SFAS
No. 141R will change the accounting treatment and disclosure for certain
specific items in a business combination. SFAS No. 141R applies prospectively to
business combinations for which the acquisition date is on or after the
beginning of the first annual reporting period beginning on or after December
15, 2008. Accordingly, any business combinations we engage in will be recorded
and disclosed following existing GAAP until January 1, 2009. We expect SFAS No.
141R will have an impact on accounting for business combinations once adopted
but the effect is dependent upon acquisitions at that time. We are still
assessing the impact of this pronouncement.
F-8
In December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in
Consolidated Financial Statements--An Amendment of ARB No. 51, or SFAS No. 160".
SFAS No. 160 establishes new accounting and reporting standards for the
noncontrolling interest in a subsidiary and for the deconsolidation of a
subsidiary. SFAS No. 160 is effective for fiscal years beginning on or after
December 15, 2008. We believe that SFAS 160 should not have a material impact on
our financial position or results of operations.
In March 2008, the FASB issued Statement No. 161, "Disclosures about Derivative
Instruments and Hedging Activities--an amendment of FASB Statement No. 133"
(SFAS 161). The Statement requires companies to provide enhanced disclosures
regarding derivative instruments and hedging activities. It requires companies
to better convey the purpose of derivative use in terms of the risks that such
company is intending to manage. Disclosures about (a) how and why an entity uses
derivative instruments, (b) how derivative instruments and related hedged items
are accounted for under SFAS No. 133 and its related interpretations, and (c)
how derivative instruments and related hedged items affect a company's financial
position, financial performance, and cash flows are required. This Statement
retains the same scope as SFAS No. 133 and is effective for fiscal years and
interim periods beginning after November 15, 2008. The Company does not expect
the adoption of SFAS 161 to have a material effect on its results of operations
and financial condition.
In April 2008, the FASB issued FASB Staff Position (FSP) FAS 142-3,
"Determination of the Useful Life of Intangible Assets." This FSP amends the
factors that should be considered in developing renewal or extension assumptions
used to determine the useful life of a recognized intangible asset under FASB
Statement No. 142, "Goodwill and Other Intangible Assets." The intent of this
FSP is to improve the consistency between the useful life of a recognized
intangible asset under Statement 142 and the period of expected cash flows used
to measure the fair value of the asset under FASB Statement No. 141 (Revised
2007), "Business Combinations," and other U.S. generally accepted accounting
principles (GAAP). This FSP is effective for financial statements issued for
fiscal years beginning after December 15, 2008, and interim periods within those
fiscal years. Early adoption is prohibited. The Company does not expect the
adoption of FAS 142-3 to have a material effect on its results of operations and
financial condition.
In May 2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted
Accounting Principles" (SFAS 162). SFAS 162 identifies the sources of accounting
principles and the framework for selecting the principles used in the
preparation of financial statements of nongovernmental entities that are
presented in conformity with generally accepted accounting principles (the GAAP
hierarchy). SFAS 162 will become effective 60 days following the SEC's approval
of the Public Company Accounting Oversight Board amendments to AU Section 411,
"The Meaning of Present Fairly in Conformity With Generally Accepted Accounting
Principles." The Company does not expect the adoption of SFAS 162 to have a
material effect on its results of operations and financial condition.
In May 2008, the FASB issued FASB Staff Position (FSP) No. APB 14-1 "Accounting
for Convertible Debt Instruments That May Be Settled in Cash upon Conversion
(Including Partial Cash Settlement)" (FSP APB 14-1). FSP APB 14-1 requires the
issuer of certain convertible debt instruments that may be settled in cash (or
other assets) on conversion to separately account for the liability (debt) and
equity (conversion option) components of the instrument in a manner that
reflects the issuer's non-convertible debt borrowing rate. FSP APB 14-1 is
effective for fiscal years beginning after December 15, 2008 on a retroactive
basis and will be adopted by the Company in the first quarter of fiscal 2009.
The Company does not expect the adoption of FSP APB 14-1 to have a material
effect on its results of operations and financial condition.
F-9
NOTE 2. INVENTORY
As of October 31, 2008, inventory consisted of the following:
Cost
Parts
Vortex hull & deck shells (2) $ 11,427
Parts 19,193
-------------
Total Parts $ 30,620
--------------
Work-in-Progress
12' Fire Rescue $ 2,358
15' Fire Rescue $ 19,885
21' Fire Rescue 12,603
---------------
Total Work-in-Progress $ 34,846
--------------
Finished Goods
15' Fire Rescue - Demo $ 6,236
---------------
Total Finished Goods $ 6,236
---------------
Total Inventory $ 71,702
=============
NOTE 3. PREPAID EXPENSES
Prior the year ended April 30, 2008, the Company entered into an agreement with
Mr. Jesse Solano, to fabricate upholstery for watercrafts in exchange for
150,000 shares of common stock of the Company. The Company valued the stock as
per the agreement at $0.20 per share. As of October 31, 2008, the outstanding
amount was $24,000.
NOTE 4. FIXED ASSETS
At October 31, 2008, fixed assets consisted of the following:
Fire Rescue Mold 12' $ 7,761
Fire Rescue Mold 15' 66,835
Fire Rescue Mold 21' 268,535
Office Equipment 20,740
Tools 12,249
-----------
Total 376,120
Depreciation (85,828)
-----------
Net Fixed Assets $ 290,292
===========
F-10
NOTE 5. INVESTMENT
Medina International Holdings, Inc. and its subsidiary have invested $500 in the
exchange of 500,000 shares of the restricted common stock of Genesis Companies
Group, Inc. Messrs. Medina and Mankal, directors and officers of the Company
also serve as officers and directors of Genesis Companies Group, Inc. The
500,000 shares represent 3% of the issued and outstanding common shares of
Genesis Companies Group, Inc.
These securities are carried at their estimated fair value of $500 based upon
the amount paid for the shares, due to the fact that there is no trading market
for the Genesis Companies Group, Inc. shares. Because there is not a trading
market for the shares, the Company is unable to recognize any gains or losses on
the value of the shares and has classified the shares as a long term asset.
The Company invested $25,000 in Nexgen, Inc. for innovative fire protective
equipment during the six months ended
October 31, 2008.
NOTE 6. LINE OF CREDIT
At October 31, 2008, the Company has credit card with an available credit of
$10,000, under which the Company may borrow on an unsecured basis with an
interest rate of 16.99% with a payment due date on the 18th of every month. At
October 31, 2008, the outstanding balance for this credit card was $7,780.
NOTE 7. NOTE PAYABLE
At October 31, 2008, the Company had an unsecured note payable with an unrelated
party in the amount of $10,000, which bears an 8% interest repayable within 15
months or with an option to convert the amount of the note payable into the
Company's common stock at $0.25 per share.
At October 31, 2008, the Company had an unsecured note payable with an related
party for consulting services in the amount of $50,000, which bears no interest.
At October 31, 2008, the Company had an unsecured note payable with Genesis
Companies Group, Inc. a related party in the amount of $37,325, which bears no
interest.
NOTE 8. RELATED PARTY BORROWINGS
At October 31, 2008, in exchange for unsecured, 8.5% promissory notes, due on
the demand the following individuals, who are officers, directors and
shareholders of the Company loaned funds in the following amounts:
F-11
Daniel Medina, President & Director $120,371
Madhava Rao Mankal, Chief Financial Officer & Director $248,434
--------
Total $368,805
========
NOTE 9. STOCKHOLDERS' DEFICIT:
There was no common stock issued during the six months ended October 31, 2008.
During the six months ended October 31, 2008, the Company committed to issuing
57,500 shares of its restricted common stock to its directors for services.
These shares were valued at $550 and the Company has recognized a compensation
expense of $550.
NOTE 10. COMMITMENTS
Rental Leases
The Company rents an 11,000 square-foot manufacturing facility for $3,000 per
month on a month-to-month basis at 255 S. Leland Norton Way, San Bernardino, CA
92408.
Fixed Asset Purchase Agreement
On June 18, 2008, we entered into a Fixed Asset Purchase Agreement with MGS
Grand Sports, Inc. ("MGS Grand") and Mardikian Design Associates ("Mardikian")
to purchase the fixed assets of Modena Sports, Design, LLC ("Modena Sports") in
exchange for 5,500,000 shares of its restricted common stock. MGA Grand owns a
95% equity interest in Modena Sports and Mardikian owns the remaining 5% equity
interest. The fixed assets to be acquired by us consist of office equipment,
tools and machinery. In addition, we will acquire web sites and domain names for
the websites Modena Sports. Upon the completion of the transaction, Modena
Sports will become our wholly-owned subsidiary. The transaction will be
completed upon the delivery of audited financial statements.
Modena Sports was organized in the state of California and does business as
Harbor Guard Business. Modena Sports is involved in the manufacturing of fire
and rescue boats.
Mold Purchase Agreement
On June 18, 2008, Medina and MGS Grand and Mardikian Design entered into a Mold
Purchase Agreement, as a part of the Fixed Asset Purchase Agreement, referred to
above. The Mold Purchase Agreement allows for the purchase of certain molds and
tools from MGS Grand and Mardikian Design.
License Agreement
On June 18, 2008, the Company, MGS Grand and Albert Mardikian ("Mardikian")
entered into a License Agreement to allow the Registrant exclusive rights to the
patents and designs for the "rescue jet" personal water craft and related
assemblies, systems and design rights. The License Agreement revised the prior
license agreements between the Company and Mr. Mardikian.
F-12
We have agreed to pay a royalty for the use of the design and patents in an
amount equal to gross sales less sales returns and freight and sales commissions
for a period of 15 years. The royalties consist of:
a) 2% for Patented Designs with or without Patented Fire Pump technology used
in our
production;
b) 1% for Patented Pump Technology used in designs other than Mardikian or his
associates;
c) 1% for using Patents in any of distributor or associated companies
products; and
d) we will pay $1,000,000 to MGS ($200,000 in 2 months minimum and 3 months
maximum, $800,000 at a rate of 10% of each boat sale until $800,000 has
been paid).
F-13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with our unaudited
financial statements and notes thereto included herein. In connection with, and
because we desire to take advantage of, the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995, we caution readers regarding
certain forward looking statements in the following discussion and elsewhere in
this report and in any other statement made by, or on our behalf, whether or not
in future filings with the Securities and Exchange Commission. Forward-looking
statements are statements not based on historical information and which relate
to future operations, strategies, financial results or other developments.
Forward looking statements are necessarily based upon estimates and assumptions
that are inherently subject to significant business, economic and competitive
uncertainties and contingencies, many of which are beyond our control and many
of which, with respect to future business decisions, are subject to change.
These uncertainties and contingencies can affect actual results and could cause
actual results to differ materially from those expressed in any forward looking
statements made by, or on our behalf. We disclaim any obligation to update
forward-looking statements.
The independent registered public accounting firm's report on the Company's
financial statements as of April 30, 2008, and for each of the years in the
two-year period then ended, includes a "going concern" explanatory paragraph,
that describes substantial doubt about the Company's ability to continue as a
going concern. Management's plans in regard to the factors prompting the
explanatory paragraph are discussed below and also in Note 1 to the unaudited
quarterly financial statements.
1
PLAN OF OPERATIONS
We are in the process of rebuilding/manufacturing water crafts ranging from 12'
to 37'.
Fixed Asset Purchase Agreement
On June 18, 2008, we entered into a Fixed Asset Purchase Agreement with MGS
Grand Sports, Inc. ("MGS Grand") and Mardikian Design Associates ("Mardikian")
to purchase the fixed assets of Modena Sports, Design, LLC ("Modena Sports") in
exchange for 5,500,000 shares of Medina International Holdings, Inc. restricted
common stock. MGA Grand owns a 95% equity interest in Modena Sports and
Mardikian owns the remaining 5% equity interest. The fixed assets to be acquired
by us consist of office equipment, tools and machinery. In addition, we will
acquire web sites and domain names for the websites Modena Sports. Upon the
completion of the transaction, Modena Sports will become our wholly-owned
subsidiary. The transaction will be completed upon the delivery of audited
financial statements of Modena Sports Design, LLC which is expected within 200
days of this agreement.
Modena Sports was organized in the state of California and does business as
Harbor Guard Business. Modena Sports is involved in the manufacturing of fire
and rescue boats.
Mold Purchase Agreement
On June 18, 2008, Medina and MGS Grand and Mardikian Design entered into a Mold
Purchase Agreement, as a part of the Fixed Asset Purchase Agreement, referred to
above. The Mold Purchase Agreement allows for the purchase of certain molds and
tools from MGS Grand and Mardikian Design.
License Agreement
On June 18, 2008, the Company, MGS Grand and Albert Mardikian ("Mardikian")
entered into a License Agreement to allow the Registrant exclusive rights to the
patents and designs for the "rescue jet" personal water craft and related
assemblies, systems and design rights. The License Agreement revised the prior
license agreements between the Company and Mr. Mardikian.
We have agreed to pay a royalty for the use of the design and patents in an
amount equal to gross sales less sales returns and freight and sales commissions
for a period of 15 years. The royalties consist of:
a) 2% for Patented Designs with or without Patented Fire Pump technology used
in our production;
b) 1% for Patented Pump Technology used in designs other than Mardikian or his
associates;
c) 1% for using Patents in any of distributor or associated companies
products; and
d) we will pay $1,000,000 to MGS ($200,000 in 2 months minimum and 3 months
maximum, $800,000 at a rate of 10% of each boat sale until $800,000 has
been paid).
The Company engages five full time employees. Our President and Chief Financial
Officer have been engaged on full time to work with Modena Sports Design, LLC.
2
Our securities are currently not liquid. There are no market makers in our
securities and it is not anticipated that any market will develop for our
securities until such time as we successfully implement our business plan of
producing and marketing our laser stripping machine and/or acquiring other
assets or equipment. We presently have no liquid financial resources to offer
such a candidate and must rely upon an exchange of our stock to complete such a
merger or acquisition.
RESULTS OF OPERATION
Results Of Operations For The Three-Month Period Ended October 31, 2008 Compared
To The Same Period Ended October 31, 2007
The Company did not recognize any revenues during the three months ended October
31, 2008. We anticipate that the Company will not generate any significant
revenues until we achieve our business objective of operating revenues, of which
there can be no assurance.
During the three months ended October 31, 2008, operating expenses were $35,995
compared to $90,740 in the three months ended October 31, 2007. The $54,745
decrease was due to a decrease in marketing expenses by $8,001, consultant
expenses by $30,000, travel expenses by $2,027 and admin expenses by $17,140.
Interest expense for the three months ended October 31, 2008 and 2007 were
$8,386 and $7,489, respectively.
During the three months ended October 31, 2008, the Company recognized a net
loss of $44,381 compared to a net loss of $98,229 during the three months ended
October 31, 2007. The decrease of $53,848 was due mostly to the decrease in
marketing, travel, administration, and consulting expenses, as discussed above.
Results Of Operations For The Six-Month Period Ended October 31, 2008 Compared
To The Same Period Ended October 31, 2007
The Company did not recognize any revenues during the six months ended October
31, 2008. We anticipate that the Company will not generate any significant
revenues until we achieve our business objective of operating revenues, of which
there can be no assurance.
During the six months ended October 31, 2008, operating expenses were $63,501
compared to $726,736 in the six months ended October 31, 2007. The $663,235
decrease was due to a decrease in marketing expenses by $8,245, consultant
expenses by $421,600, stock compensation for services by $246,879, professional
fees by $8,663, travel by $11,077 and admin expenses by $68,062.
Interest expense for the six months ended October 31, 2008 and 2007 were $17,641
and $15,258, respectively.
3
During the six months ended October 31, 2008, the Company recognized a net loss
of $81,052 compared to a net loss of $741,994 during the six months ended
October 31, 2007. The decrease of $660,942 was due mostly to the decrease in
marketing, travel, stock compensation, administration, and consulting expenses,
as discussed above.
LIQUIDITY AND CAPITAL RESOURCES
At October 31, 2008, we had total current assets of $ 95,717, consisting of $15
in cash,$24,000 in vendor advances and $71,702 in inventory. At October 31,
2008, we had total current liabilities of $701,203. The Company will need to
raise capital through loans or private placements in order to carry out any
operational plans. The Company does not have a source of such capital at this
time. At October 31, 2008, the Company had a working capital deficit of
$605,486.
During the six months ended October 31, 2008, the Company used $34,134 in its
operating activities. During the six months ended October 31, 2008, the Company
recognized a net loss of $81,052, which was reconciled for non-cash items of
$550 in non-cash consulting expenses and $28,572 in depreciation expense. During
the six months ended October 31, 2007, the Company received cash of $16,159 from
its operational activities. During the six months ended October 31, 2007, the
Company recognized a net loss of $741,994, which was reconciled for non-cash
items of $692,529 in non-cash consulting expenses, a $2,000 loss on the
settlement of debt and $28,623 in depreciation expense.
During the six months ended October 31, 2008, the Company used $138 in its
investment activities. During the six months ended October 31, 2007, the Company
used $22,476 in its investment activities..
The Company received $34,287 from financing activities during six months ended
October 31, 2008. Financing activities during the six months ended October 31,
2008, included $37,325 receipts from Genesis Companies Group, Inc. The receipt
of funds of $6,358 from related parties. During the six months ended October 31,
2008, the Company made payments totaling $9,376 on outstanding line of credit of
the Company.
During the six months ended October 31, 2007, the Company received cash of $801
from its financing activities. The Company received $9,000 from the issuance of
its common stock and $2,222 in loans from related parties. During the six months
ended October 31, 2007, the Company paid $14,066 on its outstanding lines of
credits.
To the extent our operations are not sufficient to fund our capital
requirements; we may enter into a revolving loan agreement with financial
institutions or attempt to raise capital through the sale of additional capital
stock or through the issuance of debt. At the present time we do not have a
revolving loan agreement with any financial institution nor can we provide any
assurance that we will be able to enter into any such agreement in the future or
be able to raise funds through the further issuance of debt or equity.
4
ITEM 3. QUANTATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not Applicable
ITEM 4. CONTROLS AND PROCEDURES
Disclosures Controls and Procedures
We have adopted and maintain disclosure controls and procedures (as such term is
defined in Rules 13a 15(e) and 15d-15(e) under the Securities Exchange Act of
1934, as amended (the "Exchange Act")) that are designed to ensure that
information required to be disclosed in our reports under the Exchange Act, is
recorded, processed, summarized and reported within the time periods required
under the SEC's rules and forms and that the information is gathered and
communicated to our management, including our Chief Executive Officer (Principal
Executive Officer) and Chief Financial Officer (Principal Financial Officer), as
appropriate, to allow for timely decisions regarding required disclosure.
As required by SEC Rule 15d-15(b), our Chief Executive Officer carried out an
evaluation under the supervision and with the participation of our management,
of the effectiveness of the design and operation of our disclosure controls and
procedures pursuant to Exchange Act Rule 15d-14 as of the end of the period
covered by this report. Based on the foregoing evaluation, our Chief Executive
Officer has concluded that our disclosure controls and procedures are effective
in timely alerting them to material information required to be included in our
periodic SEC filings and to ensure that information required to be disclosed in
our periodic SEC filings is accumulated and communicated to our management,
including our Chief Executive Officer, to allow timely decisions regarding
required disclosure as a result of the deficiency in our internal control over
financial reporting discussed below.
ITEM 4T. CONTROLS AND PROCEDURES
Management's Quarterly Report on Internal Control over Financial Reporting.
Our management is responsible for establishing and maintaining adequate internal
control over financial reporting for the company in accordance with as defined
in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our management
conducted an evaluation of the effectiveness of our internal control over
financial reporting based on the framework in Internal Control - Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission. Our internal control over financial reporting is designed to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. Our internal control over financial
reporting includes those policies and procedures that:
5
(i) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of our
assets;
(ii) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally
accepted accounting principles, and that our receipts and expenditures are
being made only in accordance with authorizations of our management and
directors; and
(iii)provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of our assets that could have
a material effect on our financial statements.
Management's assessment of the effectiveness of the small business issuer's
internal control over financial reporting is as of the quarter ended October 31,
2008. We believe that internal control over financial reporting is effective. We
have not identified any, current material weaknesses considering the nature and
extent of our current operations and any risks or errors in financial reporting
under current operations.
Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
This quarterly report does not include an attestation report of the Company's
registered public accounting firm regarding internal control over financial
reporting. Management's report was not subject to attestation by the Company's
registered public accounting firm pursuant to temporary rules of the Securities
and Exchange Commission that permit the Company to provide only management's
report in this annual report.
There was no change in our internal control over financial reporting that
occurred during the fiscal quarter ended October 31, 2008, that has materially
affected, or is reasonably likely to materially affect, our internal control
over financial reporting.
6
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS -
NONE
ITEM 2. CHANGES IN SECURITIES -
NONE
ITEM 3. DEFAULTS UPON SENIOR SECURITIES -
NONE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS -
NONE
ITEM 5. OTHER INFORMATION -
NONE
ITEM 6. EXHIBITS -
Exhibits. The following is a complete list of exhibits filed as part of this
Form 10-Q. Exhibit numbers correspond to the numbers in the Exhibit Table of
Item 601 of Regulation S-K.
Exhibit 31.1 Certification of Chief Executive Officer pursuant to Section
302 of the Sarbanes-Oxley Act.
Exhibit 31.2 Certification of Chief Financial Officer pursuant to Section
302 of the Sarbanes-Oxley Act.
Exhibit 32.1 Certification of Principal Executive Officer pursuant to
Section 906 of the Sarbanes-Oxley Act.
Exhibit 32.2 Certification of Principal Financial Officer pursuant to
Section 906 of the Sarbanes-Oxley Act.
7
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
MEDINA INTERNATIONAL HOLDINGS, INC.
(Registrant)
Dated: December 9, 2008 By: /s/ Daniel Medina
----------------------------
Daniel Medina,
President
Dated: December 9, 2008 By: /s/ Madhava Rao Mankal
-----------------------------
Madhava Rao Mankal,
Chief Financial Officer
8